IFRS, US GAAP and Mexican FRS: similarities and differences* The Summary
A comparison of IFRS, US GAAP and Mexican FRS
PricewaterhouseCoopers México Mariano Escobedo 573, Col. Rincón del Bosque. C. P. 11580, México, D. F. Tel.: 5263 6000 Fax: 5263 6010
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A closer look
A sampling of differences
This publication is designed to alert companies to the scope of accounting changes that IFRS conversion will bring and to stimulate executive thinking and preparation. With that in mind, the body of the publication provides an overview of some differences between IFRS, US GAAP and Mexican FRS(1). The differences with US GAAP included are considered relevant because some Mexican entities may have had identified the differences between Mexican FRS and US GAAP for example for a listing in the US and might find helpful this reference. This section provides a summary of some of the similarities and differences discussed in more detail on the complete publication. No summary publication can do justice to the many differences of detail that exist between US GAAP, IFRS and Mexican FRS. Even if the guidance is similar, there can be differences in the detailed application, which could have a material impact on the financial statements. In this publication, we have focused on the measurement similarities and differences most commonly found in practice. When applying the individual accounting frameworks, readers must consult all the relevant accounting standards and, where applicable, their national law. Listed companies must also follow relevant securities regulations and local stock exchange listing rules. (1) Mexican Financial Reporting Standards - Mexican FRS. The references included herein are identified considering the new guidance effective from January 1, 2009
Broad-based differences in the accounting for the provision of services (US GAAP generally prohibits the approach required by IFRS) may impact the timing of revenue recognition. Differences involving the separation of multiple deliverable arrangements into components, and the allocation of consideration between those components, may impact the timing of revenue recognition. Where differences exist, revenue may be recognized earlier under IFRS and Mexican FRS(1). The guidance in IFRS with respect to how customer loyalty programs are treated may drive significant differences. The incremental cost model that is permitted under US GAAP is not accepted under IFRS and Mexican FRS(1). (1) Mexican FRS requires following the IFRS guidance for revenue recognition as there is no specific standard in accordance with the framework except for construction contracts where specific literature exists under Mexican FRS. When transitioning to IFRS, the accounting policy should be revisited.
Expense recognitionshare-based payments
Companies that issue awards that vest ratably over time (e.g., 25% per year over a four-year period) may encounter accelerated expense recognition as well as a different total value to be expensed, for a given award, under IFRS and Mexican FRS (2). Income tax expense (benefit) related to share-based payments may be more variable under IFRS. There are differences as to when an award is classified as a liability or as a component of equity. Those differences can have profound consequences, since awards classified as liabilities require ongoing valuation adjustments through earnings each reporting period, leading to greater earnings volatility. (2) For Mexican FRS, the IFRS guidance for share based payments was followed until December 31, 2008, as there was no...
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